Pilot project next week on refunds during maiden issues

September 2nd, 2008 - 11:12 pm ICT by IANS  

Kolkata, Sep 2 (IANS) Market regulator Securities and Exchange Board of India (SEBI) will start a pilot project next week to ensure easier money transaction and refund for investors who have not been allocated shares during initial public offers, its chairman C.B. Bhave said here Tuesday.The pilot project involves the maiden issue of white metals manufacturer 20 Microns that opens Sep 8, Bhave said during an interaction with members of industry lobby Merchants Chamber of Commerce.

Under the proposal, applicants, with accounts in select branches of five banks - the State Bank of India, ICICI Bank, Union Bank, HDFC and Corporation Bank - would have their applied amount blocked in their accounts itself.

Upon a communique to that effect from the banks, the share issuing company would decide on share allotment and inform the banks.

“The company will get the money for the allotted shares. The remainder would be released. In this system, the hazards of getting the refund for the unallotted shares will not be there,” Bhave said.

“Investors, who now have to park their funds with the company for 25-30 days during the process of share allotment, will also not lose the interest amount as the money will remain in their accounts,” he added.

“However, we have to see whether the scheme is feasible and glitch-free. Lot of things are involved,” Bhave said.

Refering to the multiplicity of regulators in India, he said: “In the coming years, we need the body of regulators to coordinate among themselves and see launches of products are not delayed. If we delay the products, these will find their place in other markets like New York or Singapore.”

Stressing the need for self-regulatory organisations (SROs) in the market, the watchdog chief regretted that trade bodies were not ready to take on the responsibility.

“Who will be the SROs? This is the answer I am looking for. A mechanism has credibility when people are ready to take action against offenders”.

“I think there is a need for a change in the mindset. The feeling now is, if a black sheep is identified then the organisation’s image will be tarnished. But that’s not the case”.

“We have to cross this psychological hurdle in the Indian market. Then only we can go forward,” he added.

Bhave said to ensure transparency, SEBI was in the process of putting out as much data as possible on its website on applications pending before it.

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